Key findings

To help us understand the benefits and barriers to proptech implementation, we undertook research through an online survey, interviews and roundtable discussions with experts in both the real estate and technology industries. Three themes emerged

 

  1. A shift towards the end-user experience: Real estate businesses cited that their key drivers for current tech investment are increasing operational efficiency and improving financial performance. Given the current market conditions, businesses remain strongly focused on cash flow management. Providing a better end-user experience is considered more of a long-term play.

 

  1. Changing mindsets and skillsets: The biggest barriers to tech adoption are culture and mindset. Boards recognise the importance of innovation but are wary of failure. There is a lack of in-house specialists to identify and deliver projects that benefit end-users.

 

  1. Creating connections between the real estate and technology sectors: Fragmentation of the real estate sector is holding back wider tech adoption. Investors want to see a variety of solutions that deal with different stages of the property lifecycle. There is an appetite to develop solutions through collaboration with the tech industry on pilot projects and joint ventures.

1. A shift towards the end-user experience 

Key finding 1: Real estate businesses cited that their key drivers for current tech investment are increasing operational efficiency and improving financial performance. Given the current market conditions, businesses remain strongly focused on cash flow management. Providing a better end-user experience is considered more of a long-term play.

 

Technology leaders highlight that a fundamental shift needs to take place towards the consumer and the experience of people when interacting with the built environment.

 

Mike Roberts, Head of UK Property from Canada Life, agrees but stresses that a people-focused strategy requires demand from tenants:

 

“We see the main role of proptech is to improve the customer experience and we aim to work closely with our project teams to create spaces that will stand the test of time”.

 

“From an investor’s perspective, creating income streams is fundamental” he continues. “Attracting tenants and retaining them is critical. If tenants start making greater demands, be it in terms of quality of space, or air quality or anything else to do with the user experience, we will have to respond to that. The reality is that right now we feel the demand is simply not there”

 

R&D investment has a crucial role to play in freeing up senior stakeholders’ time, allowing them to focus on strategic and investment decisions. But a large proportion of the real state sector is still very much driven by short term returns.

 

“When it comes to R&D,” Mike states “it is a question of justifying the expense where there is no short term return”

 

It is clear then that as long as an asset class continues to provide healthy returns, the time and cost commitment required for digital solutions to be researched and implemented is seen as unnecessary and regarded by some as “a bit frivolous”.

 

Sonny Masero, an expert in digital assets for real estate and Managing Director of GALOS Limited recognises this challenge.

 

“In the case of existing buildings, there usually is no central budget for smart devices, so you have to justify the technology on each individual property” he says. “When we talk about tech investment, finding a way to plot through the budgeting minefield has to be a part of that.”

End-users will drive the pace of change

 

Mike has worked with Canada Life Investments since 1988. As Head of UK Property, he is responsible for fund and asset management specialising in the identification of added investment value.

 

“As an organisation, we recognise that we can’t stand still. We have to change in order to evolve and indeed maintain the business. I imagine there will be a tipping point but I don’t believe we are there yet.

 

For example, whilst AI in particular has a role to play in building management, when it comes to investment decisions, we are not at the stage where technology can make those decisions for us.

 

Valuation of property is an art, not a science. We don’t have the data in place yet to be able to do that using AI. That will take time.

 

Internally, I would say, that people are most engaged in the sustainability and ESG (environmental, social and corporate governance) agenda.

 

It will be pressure, coming from our end-users and other stakeholders, that will act as a catalyst for further change in the sector.”

2. Changing mindsets and skillsets

Key finding 2: The biggest barriers to tech adoption are culture and mindset. Boards recognise the importance of innovation but are wary of failure. There is a lack of in-house specialists to identify and deliver projects that benefit end-users.

 

Investors need confidence in technology and its ability to deliver clearly defined outcomes. If digital solutions are implemented, who should identify the problems that need solving?

 

“Technology can only be truly useful if it solves a genuine problem,” says Mike Roberts from Canada Life. “Does it generate real economic benefits and make a genuine difference? A lot of technology can’t do that right now.”

 

Asking the landlord or investor to set the problem is dangerous says the tech sector. Not understanding how digital products are built or the wider capabilities of technology can mean that the problem is set without understanding what is actually possible. That risks setting inflated expectations and wasting time.

 

As a smaller organisation, Mike Roberts recognises the challenge that Canada Life has “to find the internal resources to work on the possible solutions”.

 

But, if technology is to really have a meaningful impact on the sector, a cultural shift needs to take place in real estate organisations, from board level down.

Boards play an essential role when making decisions about where tech can bring the greatest reward. Board members with relevant digital or technology backgrounds will help companies gain an advantage in understanding where the strategic opportunities lie.

 

At the same time, immersing tech advisers and software developers within the day-to-day will enable real estate companies to find the best solutions for their business. Tech skills could be recruited and developed in-house or found through carefully scoped partnerships with external providers.

 

A balance of real estate and technology skills in the sector will allow real estate decision-makers to better understand what digital products can do and enable them to challenge the processes and adopt worthwhile and long-term solutions.

Skills will unlock the value of data

 

Sonny is an expert in digital assets for real estate, smart buildings, IoT, climate change and sustainability. He previously held the role of Chairman at Demand Logic, a multiple award-winning proptech start-up.

 

“People are initially sceptical about how smart devices and data can help them. At Demand Logic we built that trust by sharing the risk, making it clear at the outset that if our clients did not see the value in the data that we unlocked within three months, we would end the contractual commitment by mutual agreement.

 

In our experience, early adopters of data-driven solutions have been the landed estates, who have a long-term interest and can see the value in the data that smart tech can generate over a longer timeframe.

 

The technology to create a data-driven model already exists. The work that Demand Logic did with The Crown Estate is a great example of this.

 

The evidence of how our technology could create efficiencies was overwhelming once it was in place, but a lot of work had to be done to get to that stage.

 

We filtered lots of information from different data sources into something digestible, which clearly showed how our technology could reduce energy consumption and make buildings run more efficiently. Investors can relate that back to their service charge budgets and other outgoings.”

3. Creating connections between the real estate and technology sectors

Key finding 2: The biggest barriers to tech adoption are culture and mindset. Boards recognise the importance of innovation but are wary of failure. There is a lack of in-house specialists to identify and deliver projects that benefit end-users.

 

Investors need confidence in technology and its ability to deliver clearly defined outcomes. If digital solutions are implemented, who should identify the problems that need solving?

 

“Technology can only be truly useful if it solves a genuine problem,” says Mike Roberts from Canada Life. “Does it generate real economic benefits and make a genuine difference? A lot of technology can’t do that right now.”

 

Asking the landlord or investor to set the problem is dangerous says the tech sector. Not understanding how digital products are built or the wider capabilities of technology can mean that the problem is set without understanding what is actually possible. That risks setting inflated expectations and wasting time.

 

As a smaller organisation, Mike Roberts recognises the challenge that Canada Life has “to find the internal resources to work on the possible solutions”.

 

But, if technology is to really have a meaningful impact on the sector, a cultural shift needs to take place in real estate organisations, from board level down.

 

Boards play an essential role when making decisions about where tech can bring the greatest reward. Board members with relevant digital or technology backgrounds will help companies gain an advantage in understanding where the strategic opportunities lie.

 

At the same time, immersing tech advisers and software developers within the day-to-day will enable real estate companies to find the best solutions for their business. Tech skills could be recruited and developed in-house or found through carefully scoped partnerships with external providers.

 

A balance of real estate and technology skills in the sector will allow real estate decision-makers to better understand what digital products can do and enable them to challenge the processes and adopt worthwhile and long-term solutions.

Building bridges between people and property

 

Bridget is a former member of CBRE UK Innovation. She joined Built-ID in 2019 to scale prop tech platform ‘ Give My View’. This tool enables digital consultation and community engagement between developers and stakeholders to build trust, transparency and value into the development process.

 

Our recent launch as the Digital Consultation partner of Connected Living London is a great example. It supports the partnership between Transport for London and Grainger plc, which will deliver 3,000 homes across seven sites in London, with a minimum of 40% affordable.

 

Our platform, Give My View, launched just over six months ago, so we recognise the significance of this appointment and the value that Connected Living London saw in the platform’s capabilities. 

 

We have been tasked with working with a wide range of multi-disciplinary consultants across the sites to launch and manage digital consultation with the wider community, alongside more traditional methods. 

 

Our opportunity is to transform community engagement from a traditional box ticking exercise into an innovative approach to unlocking some of London’s most challenging yet exciting development projects.

 

If there is one message I would like to get across, it is to recognise the true value of community. We need to leverage that collective power to drive change in our cities.

 

Our involvement on this project did not come about in one day. But, with some of London’s largest landowners working with small, innovative tech firms such as Built-ID, this sends a powerful message to the wider UK proptech market on the importance of collaboration.”

If you would like to create your own connections, please join the conversation on our dedicated ‘Creating connections’ LinkedIn group or come along to future events.

To find out how, please contact Liz Carter on +44 (0) 1892 506 238 or e-mail: liz.carter@crippspg.co.uk